Resource Adequacy Enhancements: First Revised Straw Proposal - PowerPoint PPT Presentation

Calculating unforced capacity values • Unforced capacity value – or UCAP of a resource incorporates the availability of a resource using a derating factor referred to as the resource’s Effective Forced Outage Rate – or EFOR UCAP = (NQC) * (1 - EFOR) • CAISO proposes to calculate and publish monthly NQC and UCAP values for all resources each year • EFOR and resulting UCAP values will not be impacted by CAISO approved planned outages Page 22 CAISO Public

CAISO is also considering calculating forced outage rates seasonally • Contemplating two seasons: summer & winter (peak, off- peak) • Once calculated, the forced outage rate would be set for each season for the upcoming RA year • Seasonal calculations may add some complexity, but also better reflect resources’ availability during peak and off-peak seasons Page 23 CAISO Public

Unit Outage Rate Analysis Examples • NERC GADS data for WECC provides a WECC-wide average approximately 8% forced outage rate for all resource types providing outage data • CAISO has not identified a feasible method for easily converting existing OMS data into accurate unit specific forced outage rates • For illustrative purposes CAISO has provided example outage analysis to show the magnitude of outages for two resources over 2018 annual and summer periods Page 24 CAISO Public

Example Unit #1 outage rate analysis Summer 2018 Annual 2018 Page 25 CAISO Public

Example Unit #2 outage rate analysis Summer 2018 Annual 2018 Page 26 CAISO Public

Proposed forced outage rate assessment interval • CAISO proposes to apply a 16-hour window between 5:00 AM and 9:00 PM for assessing resource specific forced outage rates • Covers periods when resources are most highly in demand to meet CAISO needs and will also simplify the Availability Assessment Hours currently in use • Using same assessment intervals allows CAISO to calculate and utilize same forced outage rate for both generic and flexible capacity Page 27 CAISO Public

CAISO proposes to utilize three years of historic data to determine calculations for unit forced outage rates • Each forced outage will impact a resource’s seasonal forced outage rate and UCAP value for three years • CAISO is also considering incorporating weighting method that places more weight on more recent years • More historic periods would have less of an impact on resulting average forced outage rates – 50% weight for most recent annual forced outage rate, – 30% weight on second annual forced outage rate period, and – 20% weight on third annual forced outage rate period • Resources may improve their forced outage rates by performing well over time Page 28 CAISO Public

ELCC will establish UCAP values for wind and solar resources • CAISO will also rely on CPUC’s ELCC methodology • Currently, CPUC only applies this methodology to wind and solar resources, but could expand that to cover variable output DR and storage technologies • ELCC generally accounts for probability of forced outages for wind and solar resources Page 29 CAISO Public

Removing forced outage replacement and RAAIM application to forced outage periods • CAISO proposal will assess forced outages against forced outage rate and resulting UCAP values • CAISO will no longer include forced outage replacement as an option for addressing forced outages – Change is intended to align process with proposed assessment of resource forced outage rates to provide transparency into reliability and dependability of individual resources • CAISO will no longer have to assess resources for RAAIM during periods they have submitted a forced outage – Outage impact will be reflected in unit specific forced outage rate Page 30 CAISO Public

Forced Outage Rate Data • To determine these forced outage rates, CAISO considered two potential data sources: – CAISO’s Outage Management System, and – NERC Generation Availability Data System (GADS) • CAISO is proposing to enhance OMS to track outage rates accurately • More universal outage reporting for GADS purposes may not always align with all potential CAISO forced outage nature of work cards • Nature of work outage tracking will be helpful to focus on for defining type/nature of outages assessed against resource specific forced outage rates Page 31 CAISO Public

Initial proposal for CAISO Forced Outage Rate formulation • CAISO proposes using the standard IEEE formula as a basis for its proposed forced outage rate calculation: – EFOR = Effective forced outage rate: A measure of the probability that a generating unit will not be available due to forced outages or forced deratings – FOH = Forced outage hours: the number of hours a unit was in an unplanned outage state – EFDH = Equivalent forced derated hours: the forced derated hours converted to equivalent hours – SH = Service hours: the number of hours a unit was in in-service state Page 32 CAISO Public

CAISO must calculate each unit’s forced outage rate using clear, well defined outage definitions • Must specify how each outage nature of work card will be assessed against resource specific forced outage rate • One major concept in other regions is exclusion of outages considered “Outside of Management C ontrol” – or OMC from forced outage rate calculations – For example: a transmission induced outage or a force majeure event such as a wildfire or flooding event that forces a unit outage should be excluded from counting against unit forced outage rate • CAISO proposes to incorporate a similar concept in proposed forced outage rate assessment Page 33 CAISO Public

Forced Outage Cards – Nature of Work Lowers Lowers resource’s Nature of Work/Opportunity resource’s Nature of Work/Opportunity Status available Status available UCAP? UCAP? Plant Maintenance Yes Ambient Due to Temperature Yes Plant Trouble Yes Ambient Not Due to Temperature No Power System Stabilizer (PSS) Yes Ambient due to Fuel insufficiency Yes Ramp Rate Yes AVR/Exciter Yes RTU/RIG Yes Environmental Restrictions Yes Transitional Limitation Yes Short Term Use Limit Reached No Transmission Induced No Annual Use Limit Reached No Technical Limitations not in No Monthly Use Limit Reached No Market Model Other Use Limit Reached No Unit Supporting Startup Yes ICCP Yes Unit Testing No Off Peak Opportunity No Metering/Telemetry Yes New Generator Test Energy No Short Notice Opportunity No RIMS testing Yes RIMS Outage Yes Page 34 CAISO Public

Forced outage replacement and limiting application of RAAIM to forced outages • UCAP proposal will develop a process that relies on upfront accounting for forced outages • CAISO continues to explore modifications to remove or limit the application of RAAIM – Future proposals will provide additional development of any necessary RAAIM modifications – CAISO believes that RAAIM will no longer need apply to forced outage periods under UCAP proposal • Removing current allowance for forced outage replacement and will rely on UCAP and forced outage rate concepts to extent possible Page 35 CAISO Public

Coordination of Proposed UCAP Concept with CPUC • CAISO commits to providing the coordination necessary to align with LRA RA programs • Addressing forced outages in planning is vital – Ideally LRAs would adopt similar counting rules and requirements to minimize administrative complexity – However, system RA requirements and PRMs based on installed capacity are not inconsistent with CAISO proposal • CAISO will work with LRAs to align RA programs with current proposal – Collaborative effort includes proposing similar counting rules in future CPUC RA proceedings Page 36 CAISO Public

UCAP requirement and counting rule will not create incompatible procurement targets for system RA • Some stakeholders expressed concern that UCAP concept and installed capacity or NQC based PRM could create two different system RA procurement targets • CAISO views both concepts as interrelated but not incompatible • Proposed UCAP requirement will simply be subset (or lower bound) of LRA’s established system RA PRM target – In other regions utilizing UCAP and PRM concepts, there are two established targets – a system PRM target and UCAP requirement that is also a subset of system PRM target – UCAP requirement just removes additional margin established to cover forced outages component of system PRM target Page 37 CAISO Public

Some stakeholders expressed concerns that CAISO’s proposal can result in over-procurement • CAISO proposal for UCAP requirement recognizes forced outages are accounted for in counting method – Additional margin for forced outages not included in proposed system UCAP requirement – Proposed UCAP requirement would be lower than general installed capacity based PRM to avoid double counting of forced outages or over-procurement – CAISO believes LRAs can maintain an installed capacity PRM • UCAP requirement will provide an appropriate target to guide forward procurement of resources with better forced outage rates and better reliability compared to other resources of lower reliability quality Page 38 CAISO Public

SYSTEM RA SHOWINGS AND SUFFICIENCY TESTING Page 39 CAISO Public

CAISO will conduct two sufficiency tests for system capacity 1. Individual deficiency test 2. Portfolio deficiency test Designed to ensure: • Adequate UCAP to maintain reliability for peak load, and • Portfolio of resources work together to provide reliable operations during all hours when combined and considered together Page 40 CAISO Public

CAISO will conduct an assessment of LSE RA showings and resource supply plans • Ensure there is sufficient UCAP shown to meet identified reliability needs • LSEs and resources need only submit and show NQCs – Once shown, CAISO will consider each resource UCAP value to conduct UCAP assessment • Partial RA resources will receive a proportional UCAP value reflecting proportion shown for RA purposes – For example: A 100 MW resource with a 10 percent forced outage rate that has been shown for 50 MW of NQC will be assessed as being shown for 45 MW of UCAP RA Page 41 CAISO Public

LSEs cannot simply procure only the unforced capacity from a resource • Cannot buy 90 MW of NQC and UCAP from a 100 MW resource with a 10 percent forced outage rate – UCAP accounting method relies on the probability that some resources will be out at various times to eliminate substitution requirements – In CAISO’s review of best practices in other ISO’s such practices are not permitted LSEs that fail to meet the UCAP requirement will be notified of the deficiency, provided an opportunity to cure, and may be subject to backstop cost allocation or UCAP deficiency charges if the deficiency is not cured Page 42 CAISO Public

CAISO will conduct a portfolio deficiency test of only RA resources under various conditions • Objective of a portfolio analysis is to assess if CAISO can serve load with shown RA fleet – CAISO will test forecasted gross, net-load peaks, and all other hours – CAISO will also test the ability to maintain adequate reserves and load following • Need for this assessment is similar in concept to collective deficiency test CAISO conducts for local RA – CAISO must assess how the shown RA fleet works collectively to meet system needs • Assessments conducted only on monthly RA showings – Only showing that provides 100 percent of the system, local, and flexible RA capacity requirements Page 43 CAISO Public

Objective of a portfolio analysis is to assess if CAISO can serve load with shown RA fleet • Assessment will focus on monthly showings only – Cannot conduct a meaningful test of annual showings Iteration* Load Wind/solar Other Generators One Known Known A generator forced outage Net Load schedule determined randomly Deterministic prior to the assessment Generator One or Known Randomly A generator forced outage Stochastic several determined for each schedule determined randomly iteration with fixed prior to each iteration installed capacity Full Several Random Randomly A generator forced outage stochastic draws determined for each schedule determined randomly iteration with fixed prior to each iteration installed capacity * One iteration is defined a predetermined interval. This is interval can be a single day, a week, or a full month. Page 44 CAISO Public

CAISO must determine best platform for conducting test • Any platform used to conduct assessment should reasonably reflect actual CAISO system • CAISO explored three primary platforms: – Market Optimization based model – An offline version of CAISO market optimization software – IOOC tool – A tool used by CAISO’s Operations Engineering group to test planned transmission and generation outages, similar to the market optimization – Summer Assessment Plexos model – A Plexos model used to conduct CAISO summer assessment. Models many constraints, but not all. • Summer Assessment model is fastest, but lacks detail offered by other two Page 45 CAISO Public

CAISO favors net load deterministic model using IOOC at this time • Provides the best balance of time constraints, complexity, and data output • Processing time is critical – CAISO must conduct this assessment and provide feedback within 10 days of receiving RA showings • CAISO will be the first to conduct such an assessment – It reasonable to start with the less complicated option and learn to walk before we run • CAISO believes IOOC will yield the most reliable results – IOOC models all constraints – Can include planned outages Page 46 CAISO Public

CAISO will model only RA resources in this portfolio analysis • Additional energy provided in DA or RT markets represent energy substitutes in those markets – Not needed in portfolio assessment to determine if RA fleet is adequate • Must establish baseline inputs into assessment – CEC 1-in-2 hourly load forecast – CAISO will also include load following requirements – Wind and solar production profiles will be generated prior to running the production simulation • Profiles will not be considered must take capacity and actual use may be lower than the profile – Generator availability will be determined through Monte Carlo draw using resource forced outage rates Page 47 CAISO Public

CAISO must establish the proper metric to determine the adequacy of the portfolio • Each approach provides different metrics – Different metrics can be interpreted differently in evaluating whether the RA portfolio meets CAISO’s operational needs • CAISO explored two primary metrics: – Serving load and – Loss-of-load expectation • CAISO proposes to use serving load – Initial test is largely deterministic, there is insufficient information to generate a meaningful LOLE – Must maintain load, AS, and load following requirements for all days and all hours – If any of these requirements is not met, CAISO will identify a portfolio deficiency Page 48 CAISO Public

If any of these requirements is not met, CAISO will identify a portfolio deficiency • If portfolio is adequate, no additional action taken • If the portfolio is unable to serve load, CAISO will: – Declare a collective deficiency, – Provide a cure period, and – Conduct backstop procurement using the CPM CSP if deficiency left uncured Page 49 CAISO Public

MUST OFFER OBLIGATION AND BID INSERTION MODIFICATIONS Page 50 CAISO Public

Resources shown for RA will continue to have a must offer obligation under the proposed framework • A resource’s must offer obligations must be consistent with its NQC value – For example: A resource shown for 100 MW of NQC with a 20% forced outage rate providing 80 MW of UCAP, would have a MOO to bid 100 MW of capacity into CAISO markets • If that unit were only required to bid its UCAP value of 80 MW, then on average, CAISO would only receive 64 MWs of dependable capacity from that unit • Allows CAISO to simplify forced outage substitution – The RA fleet effectively provides its substitute capacity upfront – CAISO is exploring eliminating the existing RA forced outage substitution rules and reducing reliance on RAAIM Page 51 CAISO Public

Example: System RA Must Offer Obligations • Assume 4 resources included on RA showings, 2 sell full NQC amount and 2 shown for partial RA (below full NQC) Resource NQC Forced Amount of UCAP Showing Summary of RA System RA unit’s NQC (MW) Outage Calculation Showing NQC MOO (MW) Rate included (NQC shown for RA * 1 and UCAP (MW) – Forced Outage Rate) on RA Showing 1 100 5% 100 MW 100 MW NQC * (1 - 0.05) 100 NQC 100 NQC = 95 MW UCAP (95 UCAP) 2 100 20% 100 MW 100 MW NQC * (1 - 0.2) 100 NQC 100 NQC = 80 MW UCAP (80 UCAP) 3 100 15% 50 MW 50 MW NQC * (1 - 0.15) 50 NQC 50 NQC = 42.5 MW UCAP (42.5 UCAP) 4 100 10% 75 MW 75 MW NQC * (1 - 0.1) 75 NQC 75 NQC = 67.5 MW UCAP (67.5 UCAP) Total 400 - 325 MW 285 MW UCAP 325 MW NQC 325 MW NQC (285 UCAP) MOO Page 52 CAISO Public

CAISO proposes a standard must offer obligation to apply to all resources unless specified under exemption • Standard MOO: 24x7 bidding into day-ahead market for all resources, and 24x7 bidding into real-time market for all resources committed in the day-ahead or that can be committed in Short-Term Unit Commitment (STUC) horizon Standard Must Offer Obligation DA MOO RUC MOO RT MOO Economic bids or self- RUC availability bid for all RA capacity Economic bids or self-schedules for schedules for all RA capacity for all hours of the month the resource any remaining RA capacity from for all hours of the month is not on outage resources scheduled in IFM or RUC. resource is not on outage Economic Bids or Self-Schedules for all RA capacity that can be committed within the STUC horizon CAISO will align any RA must-offer obligations with the policies and needs identified in the Day-Ahead Market Enhancements Page 53 CAISO Public

CAISO proposes to apply bid insertion to all resources that are not use-limited, and to registered use-limited resources with an opportunity cost • Enhances CAISO’s ability to identify forced outages – Resources would need to submit an outage to avoid dispatch • Provides reliability to CAISO by ensuring bids in the market • Would not create a disincentive to show RA capacity • Exemptions required for certain resources that fall outside the categories of non-use-limited or registered use-limited Page 54 CAISO Public

CAISO may need to define exceptions to the 24X7 MOO and bid insertion rules for certain resource types • For an initial list of proposed exemptions, see table 5 in section 5.4.1 of the Revised Straw Proposal • Specific proposed modifications to existing exemptions: – NGR: Resources participating under NGR must reflect charge and discharge capabilities (currently, MOO is only on the charging portion) – RDRR: Bid insertion for RDRR resources in real-time only (currently, no bid insertion for RDRR in DA or RT) – Regulatory Must Take (RMT): For any portion of the resource that is RA and RMT, resource must provide documentation of availability and bid per documented availability. For any portion of the resource that is RA and is not RMT, resources must bid per the standard MOO Page 55 CAISO Public

PLANNED OUTAGE PROCESS ENHANCEMENTS Page 56 CAISO Public

CAISO currently uses POSO for planned outages • RA resources currently enter planned outages into the CAISO outage system • CIRA runs a daily POSO report with determination for a planned outage need for substitution • Resources may submit outages between 25 and 8 days before for POSO consideration • POSO compares the total amount of operational RA Capacity to the total system requirement – Requirements are established by CEC forecasts and are updated 60 days prior to the start of the month – Considering outages, if less capacity is available than requirements, CAISO assigns substitution obligations Page 57 CAISO Public

Current planned outage substitution obligation timeline SOM-45 RA showings due T-8 Deadline for SOM-25 First substitute capacity daily POSO run T-7 ISO SOM-42 to SOM-30 deadline to ISO validation and finalize outages supply plan updates Outage Date SOM-60 CEC monthly forecast update; Requirements set Page 58 CAISO Public

Planned outage process modifications • Stakeholder feedback requested changes to the current planned outage system • Most stakeholders were interested in redesigning the current framework around the following principles: – Encourage resource owners to enter outages early – Generally not cancel approved planned outages – Identify specific replacement requirements for a resource – Allow owners to self-select replacement capacity – Include CAISO system for procuring replacement capacity Page 59 CAISO Public

Proposal outlines several changes to the existing planned outage provisions • Development of a planned outage calendar • Requiring comparable substitute capacity • Development of a substitute capacity bulletin board • Revisions to CAISO planned outage substitution process • CAISO will redesign the POSO tool to base substitution requirements on system UCAP requirement rather than NQC requirement – When the ISO does not have excess capacity resources will be required to procure sufficient UCAP substitute capacity Page 60 CAISO Public

POSO tool • Outages will continue be approved through the POSO tool – Outages and substitute capacity will be evaluated and accepted on a first-in-last-out basis • Generators on outage will continue to be allowed to self- select substitute capacity for any outage Page 61 CAISO Public

CAISO proposes to adopt requirements to ensure comparable resources are provided for planned outage substitution • Only certain resources will be acceptable substitution for other resources seeking to take planned outages with replacement obligations • Limits replacement resources qualifying for meeting POSO requirements of particular resources to be comparable with resource going on outage • Due to transition to a fleet with greater reliance on variable and availability and use-limited resources • Important to reflect new operational constraints in planned outage substitution obligation requirements Page 62 CAISO Public

CAISO proposes that POSO requirements must ensure replacement resources reflect comparability • A resource with no use or availability limitations seeking planned outage that receives a replacement obligation would be required to replace with a comparable resource that is not use or availability limited • CAISO is focused on availability and capabilities, not technology or fuel types • Specifically exploring requirements to provide comparability related similarities such as: location, use limitations, availability limitations, run time duration limits, and Ancillary Services certification/capabilities Page 63 CAISO Public

Planned Outage replacement comparability Comparability Categories Issues Considered in CAISO Review Location TAC area, Local area Use Limitations ULR status Availability Limitations Availability Limitations: # of starts per day, # of consecutive days of operation, run Ancillary Services AS categories: certification/capabilities Spin, Non-Spin, Regulation Up/Down Run time duration limits Equal or greater run time duration (at Pmax or full NQC output) Page 64 CAISO Public

Outage calendar offers visibility into shown resource adequacy compared to requirements • Proposing to develop a calendar that shows potential availability of additional system headroom on daily basis – This headroom may allow resources to take planned outages without specifying substitute capacity – If the calendar shows no available headroom, then any RA resource requesting planned outage on those dates will be required to show substitute capacity • Exploring providing a daily MW value for UCAP headroom in excess of the RA requirements Page 65 CAISO Public

Example outage availability calendar Page 66 CAISO Public

CAISO plans to offer a bulletin board to match planned outages with substitute capacity • Resources available to voluntarily provide substitute capacity will be able to list resources and a specified price for use of that substitute capacity – CAISO bulletin board will provide daily granularity • Generators looking for substitute capacity will have visibility into resources offering substitute capacity – Exploring if results can be filtered to only show substitute capacity for a particular resource suitable for substitution (per replacement comparability requirements) • Exploring implementation so accepting capacity through this tool will automatically match resources on outage with accepted substitute capacity in CAISO systems Page 67 CAISO Public

Example for outage replacement bulletin board Resource Use-Limited Run-time A/S Fuel Type MWs Offer or Availability- duration Certified (NQC / ($/kW-Month) Limited limit at NQC UCAP) Yes – Reg A Yes (avail-limit) 4 hours Battery 20 NQC $8 Up / Down Storage 18.0 UCAP Yes – Spin B No None Gas 50 NQC $6 44.3 UCAP Yes – Spin C Yes (starts per 24 hours Gas 50 NQC $5 day) 36.6 UCAP Yes – Reg D Yes (avail-limit) 2 hours Battery 10 NQC $5 Up / Down Storage 9.2 UCAP Yes – Spin E No N/A Gas 100 NQC $4.5 + Reg Up 94.9 UCAP F Yes (VER) N/A No Solar 10 NQC $2 10 UCAP G Yes (VER) N/A No Wind 10 NQC $2 10 UCAP Yes – Spin H No 16 hours Gas 30 NQC $2 17.5 UCAP Page 68 CAISO Public

New process to take a planned outage would look similar to the current process Resource NO Subst. enters outage Needed? into OMS YES Planning Horizon Self provide UCAP substitution ISO approves OR outage Substitution via bulletin board NO Consider exceptional Local & Reliable? dispatch Real-Time Horizon YES R-T operations Page 69 CAISO Public

Proposed planned outage process timeline Page 70 CAISO Public

Ensuring reliability remains key and CAISO will retain ability to ensure planned outages do not cause issues • CAISO will continue to enforce local constraints, and may deny outages if local reliability issues arise – Self-selected substitute resources (within the same local area) may reduce instances of the ISO needing to do this • CAISO will continue to retain authority to deny an outage, even with substitute capacity, for reliability reasons • CAISO will retain ability to procure additional capacity through backstop tools after the planned outage timeframe for reliability Page 71 CAISO Public

RA IMPORTS PROVISIONS Page 72 CAISO Public

Clarifying RA Import rules concerns • RA Import provisions may cause reliability concerns • Two main issues for Import RA rules: 1. Double counting – CAISO should be able to ensure resources shown as import RA are not also relied upon by native BA to serve native load or otherwise be sold to a third party or relied upon to meet capacity needs of others in addition to CAISO load – not possible to be sure today 2. Speculative supply – Possible speculative supply (nothing secured at time of showings) providing Import RA and using bidding strategies to avoid RT MOO or delivery obligation – evidenced by high DA bids, but not conclusive and would be of less concern if most is economic energy swapping Page 73 CAISO Public

Objectives for RA import rules modifications • Create more comparable treatment to internal RA resources for RA imports – Current provisions provide less rigorous requirements for RA imports, no RT MOO for RA imports that have no DA award – No emergency recall ability and no assurance that external non- resource specific RA imports will respond to CAISO operator Exceptional Dispatch • Consider other aspects of RA Enhancements proposals for incorporating forced outage rates – Ensure fair and comparable treatment for RA imports and specifically non-resource specific imports as related to proposed Unforced Capacity counting and assessment modifications • Ensure coordination with Extended EIM and DA Markets Enhancements initiatives Page 74 CAISO Public

Ongoing analysis efforts updated for greater accuracy • Analysis to determine delivery patterns and behavior for import RA resources • CAISO has analyzed data sets for: import RA showings, HASP schedules for import RA resources, and real-time RA delivered quantity • Identifies if Import RA resource was awarded in real-time market but failed to deliver; did not deliver because the scheduling coordinator failed to bid; or actually delivered equal or greater than the RA showing Page 75 CAISO Public

Analysis has been refined for better accuracy • CAISO defines “non - delivery” as the MWh quantity that did not meet the real-time schedule – Because RA imports are scheduled hourly, the non-delivery quantity is determined by comparing the HASP schedule to the RA delivery quantity – It is important to compare these values to the RA showing amounts • Specifically , an RA import resource’s Resource ID is not limited to bidding only the amount of MWs that have been shown for RA • CAISO has observed many instances when bidding and awards for RA import Resource IDs exceed amount of MWs shown for RA Page 76 CAISO Public

Clarifying analysis of potential concerns related to RA import delivery Page 77 CAISO Public

Observed undelivered RA import resources accounts for less than 10% of hourly RA showings on average Page 78 CAISO Public

Proposed RA Import modifications • CAISO proposes to require specification of the Source BA for all RA imports on RA and Supply Plans for monthly showings • CAISO also proposes to adopt and codify provisions similar to current CPUC RA program rules and regulations for RA imports to provide firm monthly delivery under CAISO tariff to ensure similar treatment among all LSEs Page 79 CAISO Public

Specification of RA Import Resource Balancing Area Source • RA import resources are not required to be resource specific or to provide any greater certainty they represent supply from a specific Balancing Area – Only required to be shown as sourced on a specific intertie into CAISO’s system • CAISO proposes to require specification of the Source BA for all RA imports on RA and Supply Plans for monthly showings – With potential extension of day-ahead market to EIM entities, CAISO believes that RA import resources must specify source Balancing Area at minimum – Proposed modification would allow CAISO to ensure that RA imports are not double counted for EIM resource sufficiency tests Page 80 CAISO Public

Incorporating CPUC RA program RA imports rules and regulations into CAISO tariff • CPUC requires LSEs provide documentation that reflects unspecified imports being submitted to meet RA requirements have firm energy delivery and operating reserves behind them – CPUC has specified that this documentation can be contract language or an attestation from import provider that confirms RA import is supported by firm energy and operating reserves • CAISO believes it is appropriate to incorporate similar provisions for RA imports in its tariff – CAISO proposes ALL LSEs must submit supporting documentation that any non-specified RA import resource being shown on annual and monthly RA and Supply plans have firm energy delivery with equivalent supporting documentation Page 81 CAISO Public

Not pursuing some prior aspects at this time but continuing more in depth analysis • No longer proposing real-time bidding requirements for all RA Import MWs – Maintain current bidding rules for RA imports and only MWs receiving day-ahead awards will be required to bid in real-time – Continues alignment with current CPUC rules regarding bidding obligations for non-resource specific resources – Impact to efficient utilization of transmission system is important • No longer proposing requiring 24 by 7 RA Import MOO – Extension of bid obligations would fully preclude any sub-set of hours import contracts from qualifying to meet RA requirements – Considering updated analysis on RA imports this change and resulting impact of removing qualification of some import resources does not appear justified at this time Page 82 CAISO Public

Maximum Import Capability provisions • Each year, CAISO establishes maximum import capability (MIC) values for import paths – CAISO believes the calculation methodology is still working as intended without significant impact to reliability or LSEs’ ability to utilize imports for RA purposes • CAISO is not proposing to make any modifications to the calculation methodology at this time • Once MIC values are calculated the import capability is allocated to CAISO LSEs through 13 step allocation process • CAISO proposes modifications to allocation process Page 83 CAISO Public

Import capability allocation process review • After calculating total MIC, Existing Transmission Contracts (ETC) and Transmission Ownership Rights (TOR) amounts held by LSEs are protected for and removed from MIC figure – Determines remaining MIC available for allocation to LSEs – Remaining MIC referred to as Available Import Capability • Process for allocating this MIC to LSEs is referred to as the Available Import Capability Assignment process – 13 step allocation process detailed in the CAISO tariff, Section 40.4.6.2.1 – further detail provided in proposal appendix Page 84 CAISO Public

Available Import Capability Assignment process steps Process description Step 1 Determine Maximum Import Capability (MIC) - Total ETC - Total ETC for non-ISO BAA Loads Step 2 Available Import Capability - Total Import Capability to be shared Step 3 Existing Contract Import Capability (ETC inside loads) Step 4 Total Pre-RA Import Commitments & ETC - Remaining Import Capability after Step 4 Step 5 Allocate Remaining Import Capability by Load Share Ratio Step 6 CAISO posts Assigned and Unassigned Capability per Steps 1-5 Step 7 CAISO notifies SCs of LSE Assignments Transfer [Trading] of Import Capability among LSEs or Market Participants Step 8 Step 9 Initial SC requests to ISO to Assign Remaining Import Capability by Intertie Step 10 CAISO notifies SCs of LSE Assignments & posts unassigned Available Import Capability Step 11 Secondary SC Request to ISO to Assign Remaining Import Capability by Intertie Step 12 CAISO Notifies SCs of LSE Assignments & posts unassigned Available Import Capability Step 13 SCs may submit requests for Balance of Year Unassigned Available Import Capability Page 85 CAISO Public

CAISO received stakeholder feedback on challenges presented by Import Capability Assignment process • Reviewing current approach to determine if any enhancements could improve use and efficiency of Available Import Capability allocated to LSEs – Proposing to modify process to improve fairness, efficiency, and ease of understanding and implementation • Concerns about possibility some LSEs may not fully utilize allocated MIC on each intertie during all RA months – Some LSEs may not make unused MIC available for others to buy • Smaller LSEs concerned about ability to secure enough MIC on desired interties to support RA procurement Page 86 CAISO Public

CAISO proposes to incorporate an auction mechanism into Available Import Capability Assignment process • Provide alternative or additional opportunities for procurement of import capability by LSEs – Some LSEs may need to secure more than their pro rata load ratio share of MIC on any given branch group/intertie to support a particular RA contract • Alternative mechanism could allow for more efficient procurement of import capability by those LSEs that place a greater value on Import Capability for various reasons • CAISO could retain all, or a portion of the remaining Available Import Capability, to be auctioned or otherwise procured by LSEs Page 87 CAISO Public

CAISO presents an initial auction design concept for consideration and discussion purposes • Market based mechanism for allocation of import capability could address concerns regarding fairness • Develop an auction mechanism to sell and allocate all Remaining Import Capability to LSEs – Following current Step 4 after CAISO has protected for all ETCs, TORs, and Pre-RA commitments • Proposed auction mechanism would be included in the process to replace current Steps 5 through 13 Page 88 CAISO Public

Proposed auction will provide LSEs an opportunity to procure intertie-specific import capability rights • Following Step 4 of current process CAISO would keep all of Remaining Import Capability unassigned and make it all available through auction process • Auction allows LSEs to bid at value they place on import capability on any specific intertie – LSEs can then bid for the import capability they need – Import capability will be allocated according to LSE bids – 100% of Remaining Import Capability will allocated based upon bids to buy on specific interties with each intertie becoming a specific a product – Auction revenues could potentially be used to reduce TAC Transmission Revenue Requirement or allocated back to LSEs on a pro rata load share basis Page 89 CAISO Public

Other Import Capability Allocation modifications considered but not proposed at this time • Some stakeholders suggested intertie capacity not used to support an RA contract within a respective RA procurement timeframe should be released and made available to support other import RA contracts – Does not work with current monthly showing process due to procurement timing constraints • Enhance provisions for reassignment, trading, or sales of Import Capability among LSEs – If not pursuing auction mechanism CAISO may need to provide some alternative to current bilateral transfer process to better facilitate transfer of import capability among LSEs and improve efficient utilization of import capability, not proposing anything now Page 90 CAISO Public

FLEXIBLE CAPACITY Page 91 CAISO Public

CAISO seeks to close gaps by developing a flexible RA framework that captures both CAISO’s operational needs and the predictability of ramping needs • Changes to the flexible capacity product and flexible capacity needs determination should closely align with CAISO’s actual operational needs for various market runs ( i.e. , day-ahead market and fifteen-minute market) • FRACMOO2 initiative was placed on hold, the objectives and work from that initiative have been integrated into the present initiative – At this time, CAISO is closing the FRACMOO stakeholder process Page 92 CAISO Public

CAISO reviewed the drivers of flexibility need on the system • Assessment sought to identify reasons CAISO would need to move resources from a fixed schedule • The goal of this assessment was to more clearly identify how CAISO can access flexibility – Goal was not to expand the requirement definitions for flexible RA – but – • Once flexibility needs are identified, make determination if need requires forward procurement to ensure adequate capacity is available to CAISO Page 93 CAISO Public

There are multiple drivers of the CAISO need for flexibility • Flexibility is required in all intervals to satisfy ISO operational needs, but not all types of flexibility are required in all hours – Forecasts ( i.e. , load, VER, BTMs) improve between market runs – Timing granularity differs between market runs (hour, 15 min, 5 min) – Deviations from dispatch – Shaping around prescribed delivery of interties (Hourly blocks and industry ramp blocks) – Net-load ramps are non-linear • Dispatch, controllability, response in required time horizon where planned to be utilized – Tertiary – Market flexibility needs – Secondary – Regulation and AGC (Impacted by tertiary) – Primary – Frequency Response (Impacted by secondary and tertiary) Page 94 CAISO Public

CAISO requires several different types of flexibility, but not all need to be procured through resource adequacy Primary – Frequency Response, RA procurement required: No • Obligation of interconnection • CAISO needs to ensure resources are able to and incentivized to meet their obligations, not a prescription of availability Secondary – Regulation, RA procurement required: No • Market product that provides sufficient incentives through the market to ensure adequacy Tertiary – Market flexibility needs, RA procurement required: Yes • Markets require sufficient economic bid range is provided to dispatch around load and resource variability (or inflexibility) • CAISO should always have sufficient flexible capacity to pass ramp sufficiency tests • Ensures flexible resources have a path to economic viability relative to inflexible resources ( i.e. , leads to more rational retirement) Page 95 CAISO Public

There are numerous benefits of forward procurement of flexible RA capacity Examples of benefits from forward planning for tertiary or market flexibility needs include: • Realization of full EIM benefits • Predictable and economic retirement of resources • Facilitate state environmental policy at lowest cost • Mitigate random price spikes • Provide for lower cost, more reliable dispatches • Ensure CAISO can maintain reliability during highly variable weather conditions Page 96 CAISO Public

As a result, CAISO’s flexible capacity needs are to ensure numerous objectives are achieved • Markets have sufficient economic bid range to dispatch around load and resource variability (or inflexibility), manage significant net load ramps, address uncertainty and differences in market granularity (i.e. hourly vs. fifteen minute) between market runs, • CAISO always has sufficient flexible capacity to pass its own EIM ramp sufficiency tests • Flexible resources have a path to economic viability relative to inflexible resources ( i.e. , leads to more rational retirement) Page 97 CAISO Public

CAISO observes the need for two categories of flexible capacity: 1. Predictable: known and/or reasonably forecastable ramping needs – Require a set of resources economically bidding into CAISO’s day-ahead market to properly shape the day-ahead market – Allows CAISO to create a feasible market dispatch in the day- ahead market without relying on penalty parameters or exceptional dispatches 2. Unpredictable: ramping needs caused by load following and forecast error – CAISO must rely on real-time market dispatches to account for unpredictable ramps caused by uncertainty Page 98 CAISO Public

A deeper pool of flexible resources improves the efficiency of CAISO dispatch and management of renewable resources • CAISO expects net load ramps to grow and minimum net load to decrease over time • Could lead to ramp constraints within the RA fleet and require additional exceptional dispatches • CAISO proposes to maintain a requirement so there is sufficient bid range to cover the forecasted maximum three-hour net load ramps – Provide the resources needed to shape day-ahead market awards and commitments based on market solutions and should mitigate the need for exceptional dispatches Page 99 CAISO Public

The three hour net load lamp is not a linear ramp • A segment within the three-hour net load ramp requires a much faster ramp rate than the rest of the net load ramp • Three-hour upward ramps are over 50 percent of daily peak demand. • The largest one-hour net load ramps can be more than 50 percent of the three-hour net load ramp This indicates a indicates need for faster ramping resources Page 100 CAISO Public